ENERGY STORAGE

How can storage companies grow market share?

As the energy storage sector becomes increasingly competitive, some companies will struggle to remain viable, consequently profile-raising will become a key priority

BEN COOK

March 21, 2024

  • Energy storage sector increasingly competitive – some players will struggle to remain viable
  • As price becomes differentiating factor in integrator segment, profitability of whole industry is ‘being dragged down’
  • Consequently, profile-raising becoming a priority for many storage companies

The fiercely competitive energy storage sector is set to enter a period of consolidation that will see time called on the lifespans of the more inefficient market players. The increasingly cut-throat nature of the storage market is exemplified by the integrator segment. Wood Mackenzie has stated that the global battery energy storage systems (BESS) integrator market has “grown increasingly competitive”, with the top five global system integrators accounting for 62% of overall BESS shipments.

The knock-on effect of increased competition in the integrator space is being particularly felt in China. As Wood Mackenzie has highlighted, integrators in China have been “squeezed heavily by both upstream and downstream supply chain participants.” The data company concluded that possessing manufacturing capacity for key components “tends to be a necessity rather than a plus as bid requirements for energy storage projects become more detailed and stringent”.

Some market players will struggle to remain viable

This environment has resulted in price becoming the differentiating factor in China. This price war has led to integrators sacrificing profits in the battle for market share. As a consequence, the profitability of the whole industry is being dragged down. Wood Mackenzie has warned that “aggressive bid strategies with little margin will not be sustained”. This spells danger for some market players who will struggle to remain viable. “Intensifying market competition will make it difficult for companies with low profitability and no clear competitiveness to survive over the coming years,” Wood Mackenzie said, adding that the market is expected to consolidate in the short and middle term.

But it is not only the energy storage industry’s integrator segment that is set for a period of consolidation. As one director at a UK energy storage company told Energy Storage Report recently, there will be consolidation in the energy storage suppliers and contractors’ market, as well as among companies building energy storage systems. This will present a problem for many companies in the storage sector. As one source put it, the challenge for companies then will be raising their profile in a crowded market and “being the first name on people’s lips”.

Profile-raising becoming increasingly important

Profile-raising will become a major priority for energy storage companies in the coming months and years. Effective profile raising will grow market share, and increased market share puts companies at a competitive advantage for a number of reasons:

  • Companies with a larger market share frequently get better prices from suppliers, as their larger order volumes increase buying power.
  • A bigger market share and increased levels of production go hand-in-hand, with the latter enabling a company to reduce the cost of producing an individual unit due to economies of scale.
  • Greater market share helps improve sales with existing, brand-loyal customers buying more of a company’s products.
  • Market share can also broaden a company’s overall customer base as potential new customers follow the lead of existing ones.
  • Gaining market share can also strengthen a company’s reputation and give it a greater share of the spotlight. In addition to growing sales and increasing bargaining power, it can help to attract new, more talented employees.

How can energy storage companies increase market share?

One way a company can increase its market share is by improving the way its target market perceives it, as the Investopedia website has highlighted. Market positioning of this kind requires clear, sensible communications that “impress upon existing and potential customers the identity, vision, and desirability of a company and its products”, Investopedia says. In addition, you must separate your company from the competition. As you plan such communications, consider these guidelines:

1. Research as much as possible about your target audience so you have a clear understanding of its needs. The greater your understanding, the better you can deliver the message the market wants.

2. Work to establish your company’s credibility so customers know who you are, what you stand for, and that they can trust not only your products or services, but also your brand.

3. Provide a detailed explanation of exactly how your company can improve customers’ lives with its unique, high-value offerings. Then, deliver on that promise in order to strengthen the connection with customers and inspire new customers to engage.

4. Emphasise the advantages your company offers customers that competitors can’t match. Highlight your expertise in what you do and why that matters.

5. Develop messaging that is focused, personal to customers, meaningful for those who might become customers, and actionable in a way that produces results for both the target audience and company.

6. Develop key performance indicators to measure the success of your marketing and communications efforts.

7. Link internal and external marketing and communications. Employees need to hear the same messages that you send out to the marketplace. At most companies, however, internal and external communications are often mismatched and as the Harvard Business Review has highlighted, this can be very confusing, and it threatens employees’ perceptions of the company’s integrity – they are told one thing by management but observe that a different message is being sent to the public.

8. Be clear about your purpose – as consultancy Deloitte has highlighted, purpose-driven companies “witness higher market share gains and grow three times faster on average than their competitors, all while achieving higher workforce and customer satisfaction”. For more on understanding purpose, see the box below.

Source: Deloitte

Tamarindo works with organisation in the renewables sector to help them find their voice in the energy transition. If you have any queries, questions or feedback on this article – or would like to explore ways in which Tamarindo could work with your organisation – contact Insight Director Ben Cook at ben.cook@tamarindo.global